5-fluorouracil (FU), an anti-cancer drug used in the treatment of advanced colorectal and other cancers, and its metabolites are incorporated into RNA and DNA and inhibit thymidylate synthase resulting in depletion of dTTP and incorporation in DNA of uracil. Although MMR deficiency has been implicated in tolerance to FU, the mechanism of cell killing remains unclear. We have examined the cellular response to fluorodeoxyuridine (FdU) and the role of the MMR system. After brief exposure of cells to low doses of FdU, MMR mediates DNA damage signaling during S-phase and triggers arrest in G2/M in the first cell cycle in a manner requiring MutSa, MutLa, and DNA replication. Cell cycle arrest is mediated by ATR kinase and results in phosphorylation of Chk1 and SMC1. MutSa binds FdU:G mispairs in vitro consistent with its being a DNA damage sensor. Prolonged treatment with FdU results in an irreversible arrest in G2 that is independent of MMR status and leads to the accumulation of DNA lesions that are targeted by the base excision repair pathway. Thus, MMR can act as a direct sensor of FdU-mediated DNA lesions eliciting cell cycle arrest via the ATR/Chk1 pathway. However, at higher levels of damage, other damage surveillance pathways such as base excision repair also play important roles.